THE Hong Kong Financial Secretary John Tsang warned of further economic challenges ahead for the city amid global financial turmoil, company closures and investment losses.

"The financial crisis will have a considerable economic impact on the economy, and people in Hong Kong should be ready for the challenges," he told reporters yesterday. "Still, Hong Kong's fundamentals and its system are healthy and our economy remains very strong."

Tsang's comments came after three Hong Kong retailers and a toy maker collapsed within two weeks and as tightened credit conditions make it more difficult for smaller companies to refinance debt.

"We expect Hong Kong's economic activity will be very slow but still outperform" other regions in Asia in the next six months, said Kenny Tang, director of Tung Tai Securities Co in Hong Kong. "Chinese mainland will contribute to Hong Kong's meager growth looking forward."